What to Know Before Buying New Construction

What to Know Before Buying New Construction

September 9, 2021 | Buying a Home | By: Sara

Buying a new construction home is a very different process from purchasing a previously owned home. Read on for our list of what to know before buying new construction.

First Things First: Hire a Real Estate Agent

Some buyers don’t feel a real estate agent is necessary when building a new home. They think that because there is a sales agent on-site they don’t need to bring in anyone else, right? Wrong. This mistake could cost you – and we’re not just saying that so you hire a Realtor! That on-site person works for and represents the seller.

A real estate agent will work on your behalf. A good one will know what questions to ask that can get you a sizable closing cost credit from the seller. Not to mention – a seasoned agent will know how to negotiate the contract for upgrades and finishes that don’t come standard with the home (but know that in hot markets, such negotiations might not be possible).

Plus, the builder pays YOUR agent’s commission so it costs you nothing to have someone represent you during the new construction process. Now that’s a good deal!

Have Your Deposits Ready

When purchasing a home that has been previously owned, the earnest money is typically 1-2% of the sales price. When purchasing new construction, your earnest money deposit is usually 5% of the sales price. The builder typically mandates the amount as a part of their contract (see more on builder contracts below).

If you are able to customize the home and decide to add additional items outside of the initial contract, an additional new construction deposit will likely be required.  This new construction deposit could range from 25%-100% of the option purchase price depending on when you are adding these options (before or after set deadlines).

A builder’s deposit is money a buyer pays to a builder upfront at the time of a new construction contract. These funds go directly to the builder’s operations and cover the builder’s upfront costs such as buying the lot from the developer, getting a construction loan, and building to the buyer’s specifications. The deposit provides a level of protection should the buyer not actually purchase the home and being left with a home that might not appeal to the average buyer.

Typically, a builder’s deposit is 5%-10% of the total sales price. The amount will vary depending on the stage of the home’s construction at the time of purchase.  Sometimes builders will also ask for a percentage (anywhere from 50-100 percent) of any ‘add-ons’ buyer chooses. Buyers can negotiate the amount of the deposit and/or timing (perhaps paying in installments) with the builder. These deposits are almost always non-refundable. At settlement, the builder will credit the buyer the amount of the deposit at closing.

Be Prepared to Wait

Delivery can range – it could be immediate or more than a year. Make sure you understand the delivery timeframes and be prepared for these timeframes to be extended a bit. Almost every new construction project hits delays.

The Fine Print

Many builders use contracts that are much different from the area real estate board contracts used in re-sale transactions. These contracts mostly protect the builder, not the buyer. So be sure you really read through the fine print. If you are buying from a smaller or relatively unknown builder in your area, we sometimes recommend that a real estate attorney reviews the contract as well so there are no surprises. We often encourage our clients to add certain addendums to the builder contract for added protection, as often, builder contracts don’t include any contingencies! We know how to negotiate these addendums so it protects the buyer but done in a way that the builder will not reject (as can often occur with a buyer attempts to write a contingency on their own).

Builder Warranties – Fine Print Continued

You’ll also want to pay attention to the builder warranties – we can guide you through what to look for to make sure you’re covered if something goes wrong in the first few years.  

Standard Options and Upgrades

Model homes are stunning and usually include many upgraded features – which is great! But these upgrades mean more money out of your pocket. It’s important to understand what features come standard with the base home price. The on-site sales agent will give you a list of standard options and a new construction upgrade price list.


You Can Access Our New Construction Listings Here

Home Inspections

Just because you are buying a new home doesn’t mean it isn’t going to have defects.  In fact – we’ve yet to see a new construction home (or re-sale for that matter) have a completely clean home inspection.

Depending on the builder, they might allow the contract to be contingent on a final home inspection by a licensed home inspector of your choosing. This is important because without an independent inspector YOU hire to make sure everything is done to code, is safe, and in working order, the builder’s inspector will just make sure it was done to the satisfaction of the builder.  While these inspectors are very good, there are often issues requiring attention that only an outsider will spot.

Final Walk-Through & Punch List

Whether you have an independent inspection or not, don’t skip out on the final walk-through with the builder. The walk-through takes place a few days before settlement and a representative from the builder (and from our team) will attend the walk-through with you to be sure the house is in good order. It’s important that you make a punch list of cosmetic items you would like corrected (nail pops, scuff marks on the walls, chips in cabinets, light fixtures, and more).  

If you had a home inspection, now is also the time to make sure those issues are resolved. You’ll likely have the opportunity to walk through the house again before settlement and after the items have been fixed by the builder to make sure they were done to your satisfaction.

Still unsure about buying new construction? Read this post next and get the pros and cons of buying a new construction home. 

The Bottom Line

Buying new construction can be a great opportunity, but you need to know where to look in order to protect yourself.

If you have questions about the new construction home buying process (or re-sale homes), please contact us or call us directly at 703-362-3221. We are always happy to help you navigate through the home search and buying or selling process!

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